This blog was researched and written by participants in Pinnacle’s 2026 Pinnacle University development program.

Social service non-profits provide vital services, from food and care resources for the elderly to advocacy, health services and school supplies for children. Yet many social service non-profits face unique challenges in receiving insurance coverages needed to run their businesses.

Common non-profit coverages include property, directors and officers (D&O) and general liability. Additional coverages may protect in cases of cyber incidents, physical and sexual abuse and molestation (SAM) or other events.

Every additional coverage incurs additional costs. No business wants higher premiums and deductibles, but social service non-profits have limited capacity to accommodate increased expenses due to funding sources that include limited grants, donations and clients with low or fixed incomes. As a consequence, social service non-profits must decide between reducing staff and services to pay higher insurance costs or outpricing the people they serve. This difficult choice has led to many non-profits simply forgoing non-required coverages.

Increased costs for non-profits were exacerbated during the Covid-19 pandemic when many court systems closed, creating a backlog of claims and a sharp increase in payments once those courts reopened. Adding social inflation, nuclear verdict trends, and limited reinsurance availability, increased costs flowed down to policyholders, hitting the childcare sector especially hard.

Fluctuations in liability claims are at the core of that issue, particularly around SAM and within foster homes. Previously listed causes plus statute of limitations reform across the United States have produced claims with longer tails and higher severities than could have been predicted from previous circumstances. This has resulted in community-based foster homes paying millions in legal settlements. Meanwhile, many insurance providers are no longer able to provide SAM coverage due to claim costs surpassing premiums.

Social service non-profits have always operated within tight margins. They have overcome budget limitations in the past, including a previous insurance crisis in the 1980s. Below is an overview of insurance solutions in the past and solutions for today:

As shown, non-profit organizations have resources for coverage issues. To reduce liabilities, some non-profits rely on internal risk management and training for employees and volunteers. Although many larger and for-profit organizations have the resources to conduct internal risk management, the rising costs of premiums and the threat of nuclear verdicts prevent smaller non-profits from investing in similar training and prevention programs.

Risk pooling is another viable option for nonprofits. A risk pool is a collective arrangement where multiple entities come together to share and manage their risk, effectively creating their own insurance mechanism. Risk pools are not a new concept and played a significant role in helping organizations navigate the liability insurance crisis of the 1980s. We see this avenue as a potential solution to the current crisis non-profits are facing, as many have successfully reduced costs and maintained coverage through risk pools. More non-profit insurance pools may provide a practical avenue for securing appropriate liability coverage. These pools can meet state insurance requirements while offering a more cost-effective alternative to commercial insurance by reducing profit margins and reinsurance fees.

Another relief has been government intervention. Many states, such as New York, Texas and Illinois, have passed legislation and regulations to monitor and protect non-profits as they face litigation. These interventions include caps on liability payouts, additional funding or requiring commercial insurance providers to contribute to insurance pools. Looking back to the 1980s, those government interventions contributed to returning non-profit coverages to accessible costs.

Legislative solutions are not intended to shield bad actors from accountability and liability, but rather to help responsible organizations continue serving their communities while preventing abuse from occurring in the first place.

Overall, as non-profits update insurance programs in response to changing market conditions, actuaries must carefully evaluate how those changes affect analyses. Many non-profit coverages are long-tailed, with claims taking many years to fully develop.  Additionally, shifts from occurrence-form to claims-made policies, lower limits, higher premiums, and new risk management practices can disrupt historical loss development patterns. Because changes are not immediately reflected in the data, actuaries must balance professional judgment with experience, taking a “trust but verify” approach to assess whether changes are truly improving loss ratios and reducing long term exposure.  

Actuaries’ role in analyzing emerging risks, evaluating changing markets, and assessing the effectiveness of alternative coverage structures is crucial as they work alongside insurers, non-profits, and government entities to identify solutions that support the continued availability and affordability of insurance for social service non-profits.